The Pulse survey shows that advisors are shifting toward more flexible mandates, reducing allocations to core fixed income while increasing exposure to multisector fixed income and alternatives.  U.S. large-cap stocks—especially growth and blend styles—continued to dominate allocations, fueled in part by AI tailwinds and earnings strength. 

Active strategies also gained share, including active ETFs, which surged in usage over the past year. On the fixed-income side, core bond exposure was trimmed as advisors looked to diversify diversifiers like high yield, multi-sector, and credit-sensitive sectors. 

The average model portfolio holds around 16 distinct positions, and allocations to alternative strategies increased, with defined-outcome and multi-strategy mandates among the fastest-growing categories. 

Finsum: Advisors should look to factor portfolio tools to leverage in construction to better serve their clients’ needs. 

Stable value funds are a conservative investment option that aim to deliver higher returns than cash while preserving principal. They invest in high-quality bonds that are insured through contracts like guaranteed investment contracts or group annuities, which protect investors from losing money. 

These funds are available only in tax-advantaged retirement plans such as 401(k)s, and according to MetLife, more than 80% of defined contribution plans offer them. Stable value funds are often compared to money market funds, since both are designed for safety and stability. Over the 15 years ending March 2023, stable value funds delivered an annualized return of 2.99%, significantly higher than the 0.55% produced by money market funds. 

While money markets adjust quickly to interest rate changes, stable value funds respond more gradually, which can lead to short-term underperformance when rates are rising. Researching stable value funds involves looking at the fund’s goals, portfolio composition, fees, and historical performance.

Finsum: Advisors should also evaluate management tenure and ensure the fund’s returns align with its stated objectives for clients

While standard ETFs are built for long-term investors, more complex products like leveraged, inverse, and synthetic ETFs are designed for short-term or specialized strategies and carry higher risks. Leveraged ETFs amplify daily index returns, but compounding effects mean they often underperform over longer periods, making them unsuitable for buy-and-hold investors. 

Inverse ETFs, by contrast, rise when their benchmark falls and are typically used as temporary hedges against downturns rather than core holdings.

Synthetic ETFs take a different approach by using swap agreements with banks to replicate index performance instead of directly owning the securities, which reduces tracking error but introduces counterparty risk. These advanced products can be useful in the right hands, yet they require a clear understanding of their mechanics and limitations. 

Finsum: These tools can be tactical moves, not long-term wealth building, but serve short term client desires.